4 Biopharma Stocks a Billionaire Investor Just Bought

Billionaire investors undoubtedly make bad investments, at least from time to time. But clearly somewhere along the line they made some good investments, and paying attention to what they’re doing might provide hints on market trends. Keith Speights, writing for The Motley Fool, notes that David Tepper and Appaloosa Management dropped more than $1.1 billion in the fourth quarter of 2016 on four biopharma stocks. Let’s take a look.

Appaloosa bought another $660 million of Allergan stock in the fourth quarter. Why? Speights writes, “The company is an acquisition machine that continues to drive growth. You would run out of fingers pretty quickly trying to count all of the acquisitions that Allergan has made since 2007. These deals have transformed the pharmaceutical company.”

Earlier this week, Allergan announced it had acquired Pleasanton, Calif.-based Zeltiq Aesthetics for $2.475 billion. The company offers its CoolSculpting System that is considered a non-invasive alternative to liposuction. This fits well into Allergan’s medical aesthetics portfolio.

Although Appaloosa specializes in companies with distressed debt, Allergan doesn’t appear to be distressed—although it has about $32.8 billion in debt. Revenue’s still jumping, though, 15 percent in 2016 from 2015.

Appaloosa bought into Mylan with $125 million in stock in the fourth quarter. This might have been a case of buying low, as the company’s shares were down since August over controversy over drug pricing and the EpiPen.
Speights writes, “There’s a good case to be made that Mylan is now a bargain buy. The stock trades at less than eight times forward earnings. Much of the negative focus on Mylan has been about its EpiPen product. However, EpiPen is just one of over 2,700 products that Mylan markets across the world, EpiPen sales are expected to make up only 6 percent of the company’s total revenue in 2017.”

Appaloosa invested $156 million in Pfizer stock in the fourth quarter. Speights notes that Pfizer’s dividend yield is 3.93 percent. And the company is a strong portfolio and strong pipeline. Speights writes, “The company expects 15 read-outs from pivotal clinical studies over the next couple of years. One pipeline candidate of special note is PD-L1 inhibitor avelumab. The U.S. Food and Drug Administration (FDA) is scheduled to announce its decision on approval for avelumab in treating metastatic Merkel cell carcinoma (MCC) by late May.”

In 2016, Pfizer acquiredAnacor Pharmaceuticals and Medivation . Although the company hints it might be waiting for the Trump administration’s tax plans to gel, it also has suggested that more acquisitions are likely.

In the fourth quarter, Appaloosa invested $183 million in Teva Pharmaceuticals . Again, this is possibly because stock was at its lowest levels in five years. Speights writes, “Tepper probably viewed Teva as a good comeback candidate. The company’s acquisition of Actavis Generics from Allergan last year is already helping boost revenue and earnings. However, there has been a new development for Teva in early 2017 that could make a comeback much more challenging.”

Several of Teva’s patents for Copaxone were invalidated by a U.S. District Court. Copaxone is to treat multiple sclerosis, and it generated $4.2 billion in sales in 2016, accounting for 19 percent of Teva’s total revenue. The company is appealing the court decisions.

Teva is currently trading for $35.87.

Speights sums up, saying, “I think the billionaire spent his investors’ money pretty well overall. I like Allergan, Mylan, and Pfizer. Teva, however, faces too many hurdles to overcome to be a great pick, in my opinion.”